Greenback remains above ¥99 line

The dollar overcame early weakness and traded above ¥99 in Tokyo trading late Tuesday as speculation grew over a wider interest rate gap between Japan and the United States following a rise in American long-term interest rates in off-hours trading.

At 5 p.m., the U.S. currency stood at ¥99.07-09, still down from ¥99.23-24 at the same time Friday. The euro was at $1.3512-3514, down from $1.3534-3536, and at ¥133.87-92, down from ¥134.32-33. The Tokyo market was closed Monday.

In early trading, the greenback was weak below ¥99, carrying over its sluggish tone from overnight trading overseas, where it was hit by selling after Federal Reserve Bank of New York President William Dudley said in a speech that the U.S. economy “still needs the support of a very accommodative monetary policy.”

After rising from less than ¥98.70 to around ¥98.90 on purchases by Japanese importers in the middle of the morning, the dollar came under renewed selling pressure after Tokyo stocks extended losses.

As Tokyo stocks cut their losses toward the close, the dollar attracted renewed demand and rose to near ¥99.20 after European players joined trading in late hours.

Still, an official of a domestic bank said “the dollar is unlikely to chase higher ground after the Federal Reserve’s decision last week to forgo the tapering of its asset purchases for now.”

Investors were also awaiting U.S. economic data to be released later Tuesday, including the Standard & Poor’s Case-Shiller home price index for July.

“Currency players are finding it difficult to sell the greenback aggressively, as speculation is expected to grow again over a scaling down of the Fed’s quantitative easing” if the housing data prove strong, a broker said.